Feb 1, 2018

Google's Ads Still Dominate In Search, Rivals Say

Regulators are not going to relent in pressuring Google to make its search engine fairer to competitors. And it is prudent to assume that Google will not give up finding waysto keep its listings dominant. JL

Sam Schechner and Natalia Drozdiak report in the Wall Street Journal:

Third-party data show that Google's product ads appear in almost all of
the spots it displays as part of the EU remedy. Only 2%
of product-ad spots in Germany show competitors' ads. In the U.K. the
proportion is 0.4%. Some say that despite the new system, they struggle to get
products listed on the first page of Google's search results. When
they do, it is so costly to outbid Google they can barely
make money. Google continues to stymie competition in online shopping, despite a record fine from European authorities and an order to modify its behavior, rivals say. The European Union in June fined Google parent Alphabet Inc. EUR2.4 billion ($2.9 billion) and ordered it to treat competing shopping services "no less favorably" than its own. The bloc's decision said Google had abused its dominance to favor its own comparison-shopping service over competitors such as Kelkoo Group Ltd. and Compare Group BV.
Google has taken steps to comply with the ruling within the EU by creating a new system that it says treats all comparison-shopping sites equally by letting them bid for desirable product-ad slots at the top of its search results, which it had previously reserved for itself. Google's own shopping service too competes for these slots on what the company says are the same terms. It is appealing the EU decision.
Rivals say matters have barely improved, and in some areas even deteriorated. Some say that despite the new system, they struggle to get products listed on the first page of Google's search results. And when they do, they say it is so costly to outbid Google that they can barely make money. Now, several -- including Kelkoo and Compare -- are asking the bloc's competition regulators to demand a new remedy.
"If you're in a fight with Google, it's a race to the bottom," said Ben Kerkhof, managing director of Compare, whose Vergelijk.nl has been one of the bigger users of the system Google set up in September to comply with regulators. "We can't bid more than we get paid, or we lose money." New third-party data show that Google's product ads appear in almost all of the product-ad spots it displays as part of the EU remedy. In a report published Monday, search analytics firm Searchmetrics said that only 2% of product-ad spots in Germany show competitors' ads. In the U.K. the proportion is 0.4%. The researchers tested by recording product-ad results on Google for 2,500 popular keywords in each country.
The new system is "nothing game-changing," nor is it "meaningful enough to be considered a fair and even playing field," says Harald Schiffauer, managing director of Nextag Inc.'s Guenstiger.de, a German site that bids actively in the Google system.
"It's really hard to compete," said Philipp Peitsch, managing director of Idealo, a price-comparison engine owned by Axel Springer SE. "I don't think it's a fair proposal."
Google declined to comment on rivals' individual allegations, but previously said that its remedy gives rivals the same opportunity as Google to show shopping ads to users.
The rivals' informal complaints, which the EU says are being taken seriously, show the growing threat that Google faces from a pileup of competition cases in the EU. Brussels is also investigating Google for other alleged antitrust abuses with its AdSense advertising and Android mobile operating services. Google has denied the charges.
In the current case, the EU is focusing on shopping ads that often appear at the top of results when users perform product-related searches, say, for a gas grill, on Google. Merchants would pay Google each time a user clicked. Similarly, competing comparison sites allow users to search for products and charge merchants for clicks from their sites. But links to those comparison sites appeared much lower down in Google search, which the EU in its June decision said conferred an illegal advantage to Google because users rarely scroll that far down.
In response, Google created a new auction system that lets competing comparison-shopping engines bid for highly coveted product-ad slots that Google had previously kept for itself at the top of its search results. As part of the change, Google said it would operate its shopping-ad service as if it were a profitable, standalone business to ensure doesn't overbid for ads. Google also says shopping-comparison sites were being hurt not by Google but by e-commerce giants like Amazon, where many shoppers go to find products before checking elsewhere. Amazon didn't immediately have a comment.
The European Commission, the EU's competition enforcer, says it has requested information from both Google and others on how Google's remedies are working so far. EU officials have also met with several of the complainants.
News Corp, owner of The Wall Street Journal, has formally complained to the EU about Google's conduct in other areas.
EU antitrust chief Margrethe Vestager said in a December interview that the shopping case will "remain on our working desks for some time" and that she and her team were "getting wiser by the day" about Google's measures. The case underscores how difficult it is for competition authorities to order useful or effective behavioral changes in a marketplace that sometimes moves faster than regulators can.
On Monday, Google submitted the first of regular reports to EU authorities on its remedy measures. Should the EU find Google's remedies don't adhere to its decision, it could impose fines as high as 5% of the company's global daily revenues for each day Google doesn't comply.
Competitors point to several reasons why they want the remedy changed. Some say they have higher fixed costs than Google, making it harder to match Google's bids. Others complain that ads they place via Google click directly through to their clients' websites, rather than their price-comparison engine, depriving competitors of a chance to add value and woo internet users.
Some rivals also allege Google has continued to demote their websites in its general search results since the EU decision, which also alleged such demotions. Kelkoo CEO Richard Stables says the firm's revenue from general search traffic dropped by 62% last year, to EUR2.3 million. In 2018, he projects a two-thirds drop to EUR800,000.
"What we've seen since the decision is that demotions have accelerated," Mr. Stables said.

Save And Share :

0
comments:

Post a Comment

As a Partner and Co-Founder of Predictiv and PredictivAsia, Jon specializes in management performance and organizational effectiveness for both domestic and international clients. He is an editor and author whose works include Invisible Advantage: How Intangilbles are Driving Business Performance.Learn more...